What is an aggregate? How is it used in macroeconomics? Give two examples of specific aggregates that are used in the study of macroeconomics.
What will be an ideal response?
An “aggregate” is an abstraction that macroeconomists find convenient to use in describing some important feature of the overall economy. Aggregates are used in macroeconomics as simplifications to focus on the total of economic activity in contrast to the activity of one part of the economy. The aggregates described in the text were gross domestic product (the sum of the total production of the nation’s economy), aggregate demand (the sum of total demand for all the final goods and services), aggregate supply (the sum total of all the output offered for sale at various price levels), and the price level or price index (a number that serves as a measure of the average price of all final goods and services in the economy for some time period).
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To close an expansionary gap, the Fed ________ interest rates which ________ aggregate spending and ________ short-run equilibrium output.
A. raises; decreases; increases B. raises; decreases; decreases C. raises; increases; increases D. reduces; increases; decreases
The market will overproduce goods that have external costs because
A. Producers experience lower costs than society. B. Producers cannot keep these goods from consumers who do not pay, so they have to produce greater amounts. C. The government is not able to produce these goods. D. Producers experience higher costs than society.
If MUx/Px > MUy/Py, then
A. X is more expensive than Y. B. Y is more expensive than X. C. spending a dollar less on X and a dollar more on Y increases utility. D. spending a dollar less on Y and a dollar more on X increases utility.
Firm A is a monopoly. The demand for its output is p = 90 - Q. Production is such that Q = L. Firm A hires only unionized labor. The marginal cost to the union is $10 per unit of labor. The union will sell
A) 20 units of labor at a wage of $10. B) 20 units of labor at a wage of $40. C) 20 units of labor at a wage of $50. D) 20 units of labor at a wage of $70.